Why and how edges disappear?What's your experience?

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Kai wrote:
Sun Jan 12, 2020 2:07 pm
offlimit88 wrote:
Sun Jan 12, 2020 7:09 am
Hello,i m quite new to this world, so i would like the hear your opinion on this.
I always come back to my strategies and try to improve them, modify them, make sub-strategies and etc etc.
But why does a edge disappear? Here my thoughts
1) Your strategy is too straightforward, easy research on it, lot of competiton in that particular niche
2) You ve been caught using large stakes and people are "watching you" (creepy , can really happen?)

So, correct if i am wrong, the more complex is the underlay of your strategy, the less competion will be in there.
How often did you lose your edge, how much time do you spend on keeping your strategies profitable?
Didn't have the chance to observe the markets over the long term since I haven't been in the game for too long, but I think it entirely depends on type of edge and what it's based on. The core fundamentals of the market probably never change, with psychology behind the market arguably being the most important one, so only the minor stuff around it can change and evolve, like the order flow stuff and the way the money arrives in the market, the little biases, the volume of the money and the market noise with all the little patterns around it and other similar market dynamics.

I think the proprietor of this forum has done extremely well to prove that fact, that if you truly understand the core principles of the market and build edges around those principles then you could probably go on forever and will never lose the edge. Because this greater understanding then gives you the luxury to pick your battles and tweak your approach or adapt to whatever bias is currently active in the markets at the time and so on.

So it's only logical that minor edges can severely weaken over time or completely disappear because you don't have any control over them, for example if you randomly stumble upon a certain pattern or bias then when/if the market dynamics shift enough whatever edge you've built around this pattern may well be gone, and without deeper level of understanding where this edge even came from you will most likely be unable to adapt. In another example, if you build an edge around scalping the market noise then your edge can only really die if the noise dries up, and if that happens there's not much you can do (other than maybe publishing a book about it). Less noise and betting activity in general means less automated fatfinger opportunities and less market making bot opportunities and so on. Goes without saying that if your edge is based on speed alone then you're royally stuffed if something like bet placement delay gets increased or someone faster than you shows up etc.

Considering the way that the markets behave nowadays, with increasing volatility across the board, particularly when genuine momentum gets a hold of the market, that for me is a strong indication that a large part of the market behavior is automated, so it probably makes sense to build some of your edges around momentum itself.

That being said the edges that I lost were only minor edges based on order flow, because the market dynamics slightly shifted over time, but this shift in turn created some new opportunities as well. Therefore, I was able to the replace and improve upon the lost edges/strategies, because the core edge that I've built gives me the opportunity to approach the same market in a myriad of ways and it was still in place, if that makes sense.

To sum it up, I think losing edges and strategies is very normal just like losing trades are normal, the important thing for me is having the ability to replace them if needed, but also to build edges around the core trading principles so that they don't disappear over night. Obviously some edges completely transcend sport and can be used in the same or similar manner across various sports, so if you lose your edge in one sport you may be able to use the same or similar approach in a different sport, while some edges can be more or less universal and can work on most markets.


This is actually accepted within finance and economic theory that for an edge to be maintained indefinitely then a much deeper level of market understanding must be obtained. For example "Tape Reading" principles would apply to any market at any time and have applied for the past 400 years of speculation and will apply probably for the next 400 years. So why do edges disappear???

There is no one answer really but it could be one reason or a combination of reasons.

1. Your edge was never really there in the first place and you were never aware of the sample size needed to prove your edge.

2. Your system was too easily copied and replicated by too many people

3. For psychological reasons to do with emotional attachment to money you were no longer trading the same way when you scaled up.

4. As you scaled up your trade sizes were starting to have an impact on the market itself. Remember that WE BECOME THE MARKET!!!

5. In horseracing for example there could be changes within the sport that eradicate your edge

The list is endless really but as Kai said, trading principles completely transcend sport because we are merely trading numbers. An increased understanding of a market on a micro and macro level will allow you to replace edges quite simply or at the very least come up with ideas that have potential. System design is a complex field but there are two key processes at work here to achieve success.

1. Learn everything you can about the markets you trade and build a much greater understanding on a micro and macro level (Google them if you don't know what they mean)
2. This will not only allow you to create an edge but also to create an edge that is ROBUST meaning it won't have a shelf life.
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